Chapter-8BarryBus21

Increased wage costs 2bad debt costs 3delayed receipt

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Unformatted text preview: wage costs. 2.Bad debt costs. 3.Delayed receipt of cash. 4 5 6 7 Allowance Method The allowance method follows a two-step process, described below: 1.Make an end-of-period adjustment to record the estimated bad debts in the period credit sales occur. 2.Remove ("write off") specific customer balances when they are known to be uncollectible. 8 1. Adjust for Estimated Bad Debts 9 10 11 12 Percentage of Credit Sales Method The percentage of credit sales method estimates bad debt expense by multiplying the historical percentage of bad debt losses by the current period's credit sales. Net credit...
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